Millionaire: is it still a relevant descriptor?

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Forums › Finance and wealth management › Millionaire: is it still a relevant descriptor?

Geektastic

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#288385 25-Jun-2021 12:00

I was reading an article in the press the other day and they were reporting on how many people had become millionaires during Covid.

I sat and thought about the use of the word - it seems a bit ineffectual now. For example, when I was born, in the late 60's, someone who was a millionaire then was pretty well off - to have the same spending power as they had then in today's money (USD) you would need about $8.5 million now.

So the value of the money required to be a millionaire is a fraction of what it was even 50 years ago or so yet we still cling to the term and the positive or negative aspects of it as if it were still the same.

The MSM continue to throw the term around - usually with at least a whiff of the pejorative about it - but logically it no longer seems to quite fit the bill. The money value has been eaten by inflation but the term definition has not.

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#2734240 25-Jun-2021 12:12

A person who via the housing price increases we have, may well be technically a millionaire, but may also be spending most of their income on mortgage, living expenses and the general costs of enjoying life. As compared to someone who has a spare million in liquid or near liquid assets should the Maserati need upgrading. Yeah, your point is correct. No big deal generally

MSM?

Handsomedan

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#2734247 25-Jun-2021 12:29

I think it's less impressive, but still a valid descriptor.

If I was mortgage free, I'd be a millionaire, but still wouldn't be rich. Those things are different.

In the 60's and 70's millionaires were rich people. They had assets and liquidity that allowed them to spend freely on flash cars and nice things. Millionaires these days could be considered middle class.

Multi-millionaires, however...different subset altogether. That implies many millions, at least some of which would be liquid.

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Geektastic

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#2734345 25-Jun-2021 13:49

It also depends on the currency.

$1m NZ is, for example, about £500,000 or US$750,000.

Dingbatt

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#2734366 25-Jun-2021 14:00

In a classless society, people’s wealth has become the default way for the Mainstream Media (MSM) to divide the populace up.

There are billionaires but not many references to ‘thousandaires’.

Perhaps the media could put “millionaire” in brackets if that’s what you owe rather than own.

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MikeB4

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#2734368 25-Jun-2021 14:04

I can't stand terms like millionaire or billionaire. I feel the same about the press using terms like Joe Bloggs builder from Te awakairangi or Betty Boop Sales Account Manager from Poneke. They are simply person from Te awakairangi.

mattwnz

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#2734423 25-Jun-2021 14:18

In terms of the term millionaire, often we now often hear rich people referred to in the media as multimillionaires. Rather than just a millionaire.

A significant amount of wealth has been created out of thin air (and from money printing) as a direct result of Covid, due to the 30% + house price inflation. But the net effect is that the well off have gotten richer, and the poor (in particular non property owners) have stayed at similar levels, or gotten poorer, esp if their rent has gone up. So the wealth that was created from thin air was not distributed. The government now has to spend years redistributing that wealth properly with taxes etc to fix the problem. But people don't want their houses to be taxed, but that is difficult when the values have gone up so much , often completely tax free. One could argue it is in inflation hit.

mattwnz

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#2734425 25-Jun-2021 14:26

Handsomedan:

I think it's less impressive, but still a valid descriptor.

If I was mortgage free, I'd be a millionaire, but still wouldn't be rich. Those things are different.

In the 60's and 70's millionaires were rich people. They had assets and liquidity that allowed them to spend freely on flash cars and nice things. Millionaires these days could be considered middle class.

Multi-millionaires, however...different subset altogether. That implies many millions, at least some of which would be liquid.

That highlights the problem in NZ where houses are way overpriced on almost every scale, esp when comparing them to incomes. I suspect reverse mortgages are going to become far more popular with people who have these overvalued assets. I have started seeing more advertising for them on TV in the evening. The problem is if they fall back in price. If house prices have increased 30-40% during a pandemic / crisis situation, then they could also drop. Although the government doesn't seem to even want prices to drop as their voter base that voted them in are largely house owners.

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tdgeek

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#2734427 25-Jun-2021 14:27

I as a house owner have got wealth from thin air, but where is it? I still have one house, if I sold it and bought another I don't get free money. I know what you are saying but for most its a paper hit. Not positively or negatively impacted. Thats not the case for impending FHB's but you need to remember that most home owners havent seen the 30% + increase in their property turn up as cash in a mattress. If you have a mortgage that's still the same, rates are still the same, your salary is probably still the same

mattwnz

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#2734431 25-Jun-2021 14:31

tdgeek:

I as a house owner have got wealth from thin air, but where is it? I still have one house, if I sold it and bought another I don't get free money. I know what you are saying but for most its a paper hit. Not positively or negatively impacted. Thats not the case for impending FHB's but you need to remember that most home owners havent seen the 30% + increase in their property turn up as cash in a mattress. If you have a mortgage that's still the same, rates are still the same, your salary is probably still the same

You can get it from a reverse mortgage (up to a certain percentage depending on age), or cashing out of housing. Also some banks will now allow you to borrow agaiest your house to buy certain ETFs and shares, referred to as an Equity builder loan, and guessing the rise in house prices allows people to borrow more than before.

tdgeek

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#2734488 25-Jun-2021 14:43

mattwnz:

You can get it from a reverse mortgage (up to a certain percentage depending on age), or cashing out of housing. Also some banks will now allow you to borrow agaiest your house to buy certain ETFs and shares, referred to as an Equity builder loan, and guessing the rise in house prices allows people to borrow more than before.

True but thats always been the case. The problem with borrowing is that you pay interest and you have to pay it back. Yes you can now borrow and buy eight Teslas instead of just four but can the homeowner pay them back?. It probably helps younger owners who have seen equity jump, but as they have only owned for a short period and at todays prices, they are probably on hefty mortgage repayments

In general, yes you are 100% correct but my point is, its not mana from heaven as its often made out to be. I would he happy with an annual refund of my house prices gains, but it doesnt work that way.

GV27

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#2734491 25-Jun-2021 14:50

A Powerball win could conceivably not be enough to get you a house on some streets in Auckland these days, let alone a palatial anything.

You could win regular Lotto and not be able to pay down your mortgage in some suburbs.

I'm not saying I wouldn't take it, but it's a fraction of what it once represented in this country.

sen8or

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#2734500 25-Jun-2021 15:02

mattwnz:

In terms of the term millionaire, often we now often hear rich people referred to in the media as multimillionaires. Rather than just a millionaire.

A significant amount of wealth has been created out of thin air (and from money printing) as a direct result of Covid, due to the 30% + house price inflation. But the net effect is that the well off have gotten richer, and the poor (in particular non property owners) have stayed at similar levels, or gotten poorer, esp if their rent has gone up. So the wealth that was created from thin air was not distributed. The government now has to spend years redistributing that wealth properly with taxes etc to fix the problem. But people don't want their houses to be taxed, but that is difficult when the values have gone up so much , often completely tax free. One could argue it is in inflation hit.

If you were cashing out of the market, that would certainly be true, but for many who buy/sell in the same market, the increase is nullified as they simply have to pay more for whatever they are buying, nill net gain (or close enough if playing in the same sand pit) with only changes in circumstances impacting the gain/loss in true wealth (larger/smaller house, changing suburbs / cities etc).

On paper my house may have risen, but as I have no intention of selling it, its a moot point, no different than if the paper value of the property declined, until I exit the market completely, its "feel good" wealth only.

elpenguino

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#2734503 25-Jun-2021 15:09

Geektastic: It also depends on the currency.

$1m NZ is, for example, about £500,000 or US$750,000.

Or when I went to Romania 60 quid got me 1.5 million lei.

Yes, I felt rich.

To your point, you could look at wealth another way e.g. how much money does the top 1%, 10%, bottom 25% have?

Obviously this amount of people stays constant.

https://www.wgtn.ac.nz/__data/assets/pdf_file/0007/1935430/WP-21-10-wealth-inequality-in-New-Zealand.pdf

"In 2017-18, the Wealthiest 1%, representing approximately 38,000
adults, had $274 billion in net worth, 20% of the total. In contrast, the Poorest 50%, representing 1.4
million adults, had just $23.7 billion, 1.7% of the total."

Most of the posters in this thread are just like chimpanzees on MDMA, full of feelings of bonhomie, joy, and optimism. Fred99 8/4/21

frankv

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#2734504 25-Jun-2021 15:09

Geektastic: It also depends on the currency.

$1m NZ is, for example, about £500,000 or US$750,000.

Yeah, I was an Italian millionaire once.

frankv

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#2734507 25-Jun-2021 15:14

mattwnz:

tdgeek:

I as a house owner have got wealth from thin air, but where is it? I still have one house, if I sold it and bought another I don't get free money.

You can get it from a reverse mortgage (up to a certain percentage depending on age), or cashing out of housing.

There's only one way of cashing out of housing, and when you do it you don't need money any more.

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